On Oct. 3 the U.S. Department
of Labor released its final version of new union financial disclosure forms,
referred to as "LM2" forms, and new rules that will govern union financial
disclosures required under the Labor Management Reporting and Disclosure Act.

Unions have objected that the
changes are politically motivated. But the disclosure forms had not been
changed in over 40 years. But the union movement has changed — a lot. Today’s
unions are far more sophisticated when it comes to money, and far more
political. The new disclosure rules reflect those changes. They will allow
union members and other interested parties a closer look at how union officials
spend their membership dues money.

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Up to now, union financial
disclosure lacked sufficient detail to enable anyone to tell what unions
actually were spending their money on. The new forms will, for the first time,
require unions to reveal their expenditures according to categories such as
representation and organizing, politics and lobbying, contributions to
charities, overhead, administration, and benefits for the union’s own
employees. This new information will enable union members to evaluate their
union’s spending priorities.

The Department of Labor also
created new forms to cover joint funds, or "trusts," which unions participate
in, such as those that the United Auto Workers entered into with the Big Three
automakers to assist laid-off workers during the 1980s. These funds have
engaged in questionable expenditures such as NASCAR sponsorships and the hosting
of lavish entertainment events. Until now, the vast majority of these funds
were not subject to reporting.

Financial transparency is
especially incumbent upon the labor movement for the simple reason that they
impose mandatory dues upon their members. Private corporations must answer to
shareholders, who may sell their shares if they are unhappy with the
corporation’s performance or suspect that the company’s financial condition is
not as strong as its management claims. Private charities must ultimately rely
on the good will of their donors, who are free to stop giving if they no longer
believe the cause is worthwhile.

But labor unions have the power
in Michigan and every other state without a right-to-work law not only to
require dues from their membership, but also to negotiate "agency fee" clauses
as part of a collective bargaining agreement. These clauses allow the union to
dismiss workers who refuse to join the union or, at a minimum, pay a fee that is
the equivalent of dues. In this way, nearly 900,000 workers in Michigan are
obligated to pay more than $270 million in union dues or look for another job.
Having allowed for forced union membership, the least government can do is to
allow workers to know how that dues money is spent.

The new forms are not without their shortcomings.
For example, under the category "representation functions," they do not require
unions to distinguish between activities such as contract negotiations or
handling of grievances in a union shop with organizing drives in which unions
try to recruit whole new sectors of workers. This mixes up two very different
sorts of activities, which should be reported separately. Contract negotiation,
done well, has a clear potential to improve working conditions and compensation
for union members. The value of union organizing drives, especially when the
workers targeted are outside of the union’s core constituency (such as when the
UAW attempts to organize university graduate students) is far less clear.

Another flaw in the new federal rules is that they
do not require that union financial disclosure reports be audited by outside
accountants — a requirement the federal government imposes on corporations.
Such audits would substantially reduce the risk of fraudulent reporting.

Nonetheless the revisions are a
significant improvement and a long overdue restoration of the right of union
members to a full accounting for the uses of union dues. It will diminish the
risk of fraud or abuse by union officials, and allow for a vigorous and also
long overdue debate on both the extent and purposes of union spending.

With the new federal reporting
rules set to take effect next year, it is now time for the State of Michigan to
step up and do its share. Currently 346,000 government employees in Michigan
are union members, paying over $100 million in membership dues annually.

But because federal law applies
only to private-sector workers, Michigan’s public-sector unions are not covered
by federal disclosure laws. Most of these workers do not have a legal right to
even the most cursory financial information on the unions that represent them.

My organization, the Mackinac
Center for Public Policy, has drawn up a draft
Union Accountability Act which, if adopted by Michigan lawmakers, would
close this glaring gap in our union disclosure rules. It would require
Michigan’s public-sector unions to provide thorough and verified financial
reports each year, including a breakdown of union spending that is even more
detailed than is required by the new federal standards.

As the great jurist Louis
Brandeis said, "Sunshine is the best disinfectant." The U.S. Department of
Labor has opened up a little more sunshine on union finances, which should only
invigorate union democracy and strengthen the union movement in the long run.